Netflix’s big pool of investors are not happy, not happy at all. Some shareholders are so unhappy they’ve turned around and filed a lawsuit against the streaming company over claims that company heads misled them on how well they were doing just a few months ago.
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The main thrust of the suit filed Tuesday in San Francisco federal district court is that Netflix misled shareholders by not disclosing issues with its business and prospects. Netflix has claimed that the reason its stock price took a nose dive off a staggeringly high cliff following April disclosures is because of password sharing and users moving on to other streaming platforms.
Shareholders say Netflix hadn’t revealed much or any of its difficulties to investors during the jump from 2021 to 2022, causing Netflix stock to trade “at artificially inflated prices,” according to the suit.
Netflix declined to comment on the lawsuit.
In court documents, investors said Netflix had forecasted big increases in subscribers to the tune of 8.5 million during its quarterly investor showcase Oct. 19, 2021. In the following year, on Jan. 20, 2022, Netflix announced after markets closed that they had “slightly over-forecasted paid net adds in Q4,” and that the actual numbers were closer to 8.3 million subscribers and that they only expected to add 2.5 million subscribers in the first quarter of the new year, lower than last year’s 4 million in the same quarter last year.
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Of course, the outcome of that quarter was much worse. On April 19, the company reported losses of 200,000 subscribers and that even more folks will be leaving the platform over the next quarter.
The suit, which is seeking class action status, is being fronted by Fiyyaz Pirani, a trustee of Texas-based Imperium Irrevocable Trust. Investors are being represented by the firm Glancy Prongay & Murray, which is also involved in a class action suit against Meta. The suit names Netflix, along with co-CEOs Reed Hastings and Ted Sarandos plus CFO Spencer Neumann, as defendants.
The lawsuit seeks an undisclosed amount in damages for investors who held stock between Oct. 19, 2021 and April 19, 2022. The lawsuit estimates there could be hundreds of thousands of people who could potentially sign on to the class action as there were millions of shares traded from October to April, and there are millions of shares currently being held.
Since Netflix reported its losses in April, its stock price has sat in the proverbial bin, a far cry from its pandemic induced high of nearly $700 a share in late 2021. The shock of its Q1 earnings was followed by a round of surprise layoffs amid cuts to planned Netflix original shows and movies. Netflix heads have also suggested they introduce a new, cheaper tier for subscribers that could include ads.